Pills on the Italian Inheritance tax

by Francesco Nicolosi

Italy has a very low inheritance tax rate compared to most countries. While Japan tops the chart at a rate of 55%, and the U.S. and U.K.  a slightly lower 40%, Italy only requires 4% of inherited assets for recipients in the first degree of relation. There are fifteen countries belonging to the Organisation for Economic Cooperation and Development (OECD) who levy no taxes on estates, and “thirteen countries or jurisdictions have repealed their estate or inheritance taxes since 2000” (Tax Foundation).

Italian Inheritance tax is calculated based on the value and status of the estate 

If the de cuius was resident for tax purposes in Italy, the Inheritance tax applies as for the totality of the assets owned by the de cuius wherever located. If the de cuius was not resident for tax purposes in Italy, the Inheritance tax applies only as for the assets located in Italy. 
The Italian Revenue Agency determines the tax owed by subtracting the total deductible inheritance liabilities and other tax deductions from the overall value of the estate assets.

In the case of properties, the taxable base used to calculate inheritance tax is the cadastral income (rendita catastale), revalued by 5% and multiplied by a certain value.  For example, if you need to calculate the inheritance tax on the primary residential property, start with the cadastral income (as shown in the cadastral survey), add 5% and then multiply by 110. 

The value of any financial assets is subject to an uplift of 10% before tax is applied to the total value.  This is due to the “presumption” that aside from financial investments a person will also own items of value,  for example jewellery, paintings, or antique furniture, which are not included in the declaration of succession.

In order to determine the inheritance tax actually due, the following tax rates must be applied:

  • 4% for the spouse or direct relatives (parents, children, grandchildren), applied on the net value for each beneficiary on amounts that exceed €1 million
  • 6% for siblings, applied on the net value for each beneficiary on amounts that exceed €100,000
  • 6% for other relatives up to the fourth degree of kinship, applied to the overall net value with no exemption limits 
  • 8%, for all other persons, applied on the overall net value with no exemption limits

Lastly, there’s an additional exemption of €1.5 million for transfers made to those with disabilities.
Inheritance tax is payable on receiving notice from the Agenzia delle Entrate after the declaration of succession is filed. In addition, real estate property situated in Italy is also subject to two Land Registry taxes “imposte di registro” of 1% and 2% of the valore catastale. These are payable at the moment of filing the succession.

The inheritance tax declaration must be submitted within 12 months of the death of a deceased (that is within 12 months of the succession) to the Italian Revenue Agency, and particularly to the office in whose area the deceased was resident, by one of the persons liable to pay it.
In case the deceased's last place of residence is unknown, the inheritance tax declaration must be submitted to the Revenue Office in Rome ("residual" jurisdiction).

The following persons are obliged to submit an inheritance tax declaration:

  • substitute heir and legatees;
  • executors of the deceased's will;
  • administrators of the estate and trustees;
  • those entitled to temporary possession of the deceased's estate.

Conversely, in Italy a person who renounces a inheritance within the 12 months period is exempted from paying the inheritance tax.